COVID-19 Update April 23: Budget Challenges Ahead

Today begins a series of communications regarding how the ubiquitous and unprecedented
budget challenges facing organizations throughout the country as a consequence of
COVID-19 affect SLU.

Transparency has been a hallmark of our frequent communications with you during this
pandemic, as has our continued consultation with key University stakeholders. In that
spirit, I want to communicate what we have done and provide a timeframe for more specific
information.

Last week, the executive committee of our Board of Trustees considered the financial
challenges of the current fiscal year and Fiscal Year 2021 (FY21), which begins July
1. Trustees endorsed the leadership team’s plan to do everything possible to keep
our people employed. This plan was grounded in the priorities we have set during several
discussions with the 45-person University Leadership Council (vice presidents, deans
and representatives from faculty, staff and students). Each conversation began with
a consideration of our mission, values, strategic priorities, and the expectations
our SLU community has of us.

On Tuesday, the ULC began to discuss how we prioritize the possible actions we could
take to mitigate the budgetary impact of the pandemic. We are also having similar
discussions with the small Faculty Senate Budget Committee this week.

In our meetings thus far, we have considered the only three areas where there is opportunity
for significant cost savings: benefits, salaries and positions.

Other reductions are going to be made, such as delaying new construction, restricting
renovations, cutting travel budgets, and so on. However, as a people-driven organization,
most of our expenses are in personnel. We can’t meet the financial challenges without
reducing our payroll costs.

Potential savings from benefits and salaries could include changes to retirement contribution
matches, an unpaid Christmas week break, furloughs, pay cuts and suspending our planned
merit pay increase. These concepts include numerous variations and would be utilized
for anywhere from six months to a year, depending on how our revenues change over
time.

Once again, our leadership team and our trustees are committed to a philosophy that
would seek, to the extent possible, to minimize the financial impact on staff and
faculty in the lowest income brackets. Further, whatever reductions we make in salaries
should most impact those who are the highest compensated.

While tempting to consider, the endowment is not a fund that can be utilized to bail
us out in a crisis like this. As the stock market plummeted, our endowment experienced
a substantial drop. This means that what we can spend from the annual endowment distribution
will decline. As is the case with other universities, the vast majority of our endowment
is made up of restricted funds – money that must be spent to support a specific initiative,
such as an endowed professorship, as required by the binding agreement we have with
the donor. We are not free to “spend the principal,” nor to divert the proceeds to
support areas beyond those specified in the donor agreement.

Unrestricted endowment funds are limited, and largely focused on funding scholarships
for our students. I do not think many would advocate redirecting that money for other
uses. And were we to replace funded aid with unfunded aid, the impact on net tuition
revenue would remain the same.

Moving forward, here is what I commit to you:

We expect to share more details in the coming days about the magnitude of our budget
challenges, which are our best estimates, based on the information we currently have.
Unfortunately, because so much about the path of this novel coronavirus is unknown,
our ability to forecast is compromised.

We do not want to misguide you. The breadth and scope of our financial challenges
rest with the duration and resolution of the pandemic. Decisions and projections are
subject to revision as the future unfolds. As forecasts change, we will update you.

We will continue to consult with leadership representing faculty, staff and students.

Our Board of Trustees will meet at the end of next week. The Board has the authority
to make the major financial decisions for the university and approves its annual budget.
While you will hear more from me in the meantime, soon after that meeting – where
the board’s decisions on FY21 will be finalized – I will communicate even more about
our financial challenges and budget reductions.

This is a difficult time for many in our Billiken community. I hear from students,
staff, faculty and alumni who have lost a loved one to this calamitous virus. I hear
from alumni who have lost their jobs. I hear from graduating students who are anxious
about the dismal job market. And I hear from faculty and staff members whose partner
has lost their job, or who are struggling with the many, and often competing, demands
of managing their household while working remotely.

I realize that this puts a tremendous strain on you and those you love. Being part
of OneSLU means that we are sensitive to one another’s hardships and support each
other, just as we collectively celebrate our triumphs.

During this time of shared sacrifice, I am grateful for our mission-driven community’s
continued engagement, patience and grace. Your many notes of support and encouragement
mean a great deal to me. I regret that my current schedule has impacted my ability
to respond to each of you in a timely fashion.

Certainly, this is a painful moment in our history, but our university has faced grave
moments in its past. In each of those dark times, the SLU community pulled together
and rose to the occasion. I am confident we, the ones who carry this past resolve
forward, will share the sacrifices necessary to position our University for a strong
recovery and a bright future. The light of SLU continues to shine.